Donor Advised Funds: Great Choice for Creating Jewish Legacy

Donor advised funds have historically provided individuals with a very effective tool for making philanthropic grants as well as maximizing tax advantages. However, creating a donor advised fund may also be the first step in planning your Jewish legacy – enabling you to make a difference far into the future.

There are many benefits associated with a donor advised fund. You, as the donor, may transfer appreciated securities to the fund, while retaining flexibility to make grant recommendations to different charitable organizations. Donations may stay in the fund and earn income, allowing the donor to make grant recommendations in the future. You may receive an immediate income tax deduction for the amount of the initial gift to the fund, and there may be additional tax savings if you donate appreciated securities or property to establish or augment the donor advised fund. Donors do not pay income tax on the income generated by the fund, and this income may be used for grant making.

Donor advised funds, such as the ones created at the Jewish Federation of Cleveland, allow donors to make grant recommendations very simply with online tools, and access account balances at all times. This allows donors to have an accurate record of their philanthropic gifts for the current year as well as their giving history for past years. Donors may find this a helpful tool in response to the many requests they receive during the year. Dates and amounts of gifts are readily available.

In addition to the convenience of grant making and the tax advantages, you may use a donor advised fund as an effective way to introduce family members to philanthropy. Including family members in the charitable discussion helps individuals share their personal values. The fund is an inspirational tool for encouraging intergenerational discussion of values and philanthropic priorities.

You may allow your children, grandchildren or anyone you designate to suggest grants of a certain amount (whatever you choose) each year, and when the family gathers for holidays, you may discuss philanthropic choices together. Either way, the fund is a wonderful catalyst for family philanthropy. It is possible to use the donor advised fund as a “hybrid” family foundation which allows its advisers and selected family members to jointly recommend which charities they wish to support in any given year, and even create a mission statement for the fund.

A donor advised fund can be a valuable tool in creating a personal philanthropic estate plan. You may recommend philanthropic grants during your lifetime, then recommend specific grants to the fund’s administrator upon your death. This may liquidate the fund entirely, or you may create an endowment fund in your name, which may continue to support your most valued charities.

At the Jewish Federation of Cleveland, you, as the donor adviser, have the option to name successor advisers for the fund, make specific recommendations for total distribution of the fund or allow the fund to support the Federation’s endowment fund in perpetuity. Many times, donors leave bequests to their donor advised funds, giving their heirs, as successor advisers, the privilege to make grants recommendations of their own choice or ones that represent the values of the original donor.

Donor advised funds provide an excellent tool for current giving, but it is important to keep in mind that they are also an effective tool for creating a meaningful philanthropic plan, a Jewish legacy, that benefits you, your family and your community.

Carol Wolf is the managing director of planned giving and endowments at the Jewish Federation of Cleveland. She can be reached at cwolf@jcfcleve.org or 216-593-2805.